Colder Winter Forecast Means Higher Heating Bills

The U.S. Energy Information Administration (EIA) today released its forecast for U.S. heating requirements for the coming winter and the news will hit consumers right in the wallet. The agency expects heating demand to rise as a result of a "much colder winter east of the Rocky Mountains compared with last winter."

The EIA expects demand for natural gas to rise by nearly 14%, heating oil demand to rise by 17%, electricity demand to rise by 8%, and propane demand to rise by 17% as heating days are expected to increase by 20% to 27% in the Northeast, Midwest, and South.

And as demand rises, so do prices. While the EIA did not forecast prices, the spot price for heating oil earlier today was $3.22 a gallon at New York Harbor and the retail price is probably about $1 a gallon higher. Only 8% of American households use heating oil, but about 80% of those are in the Northeast. Heating oil stocks are lower than normal and new environmental requirements in New York state are likely to combine to tight supplies this winter.

Natural gas supplies, used both for heating and to generate electricity, are expected to reach a record high on November 1st and coal stocks, another fuel for generating electricity, are expected to be 19% higher on November 1st compared with last year's stocks.

Propane supplies are also expected to be plentiful for the 5% of U.S. households that use the fuel for heating. Propane prices will likely move with crude prices.

Paul Ausick